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UNCLAS BUENOS AIRES 000419 
 
SIPDIS 
 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
EX-IM BANK FOR MICHELE WILKINS 
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI 
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TREASURY FOR RAMIN TOLOUI AND CHRIS KUSHLIS AND OCC 
FOR CARLOS HERNANDEZ 
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HQ USSOUTHCOM MIAMI FL FOR POLAD 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB ETRD AR
SUBJECT: NEW INSIGHTS INTO INCOME DISTRIBUTION IN 
ARGENTINA 
 
 
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SUMMARY 
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¶1.  Third quarter INDEC figures show that the average 
per capita income of the ten percent of families with 
the highest incomes in Argentina was 34 times higher 
than that of the ten percent of families with the 
lowest incomes.  That difference in average incomes is 
the highest since the 2002 crisis.  Income inequality 
in Argentina was eight percent below the average for 
the rest of Latin America in the late 1990s, but a 
number of reputable analysts have argued that 
Argentina no longer belongs to the low-inequality 
group in Latin America.  Income distribution within 
Argentina worsened in most regions in the last 15 
years.  At the same time, however, the purchasing 
power of both the highest and lowest-income brackets 
rose to its highest level since the 2002 crisis.  End 
Summary. 
 
-------- ----------- ----------- ----- 
RECENT FIGURES ON INCOME DISTRIBUTION 
-------- ----------- ----------- ----- 
 
¶2.  The average per capita income of families 
comprising the ten percent of the families with the 
highest incomes (I+) was 34 times higher than the 
average per capita income of families belonging to the 
ten percent of families with the lowest incomes (I-). 
That information came from third quarter 2005 figures 
from the 31 most important urban areas, home to two 
thirds of Argentina's total population.  This 34-fold 
difference in average incomes is the highest since the 
end of the 2002 crisis (see Table I).  However, 
President Kirchner said on February 13 that income 
inequality would decrease in the following quarter, 
although he did not specify why or cite any particular 
measures he was taking to that end.  Minister of 
Economy Felisa Miceli critized the National Statistics 
Bureau (INDEC) methodology to determine inequality, 
saying that INDEC calculations considered only 
monetary income, and therefore omitted free goods 
provided to the poor by the state, such as some 
medicines or food from soup-kitchens. 
 
Table I 
Per capita income in the highest income families (I+) 
divided by per capita income in the lowest income 
families (I-) 
 
  Period   I+/I- 
 
III Q 2005  34.2 
I H 2005    29.4 
II H 2004   31.0 
I H 2004    31.0 
IV Q 2003   32.1 
May 2003    33.8 
Oct. 2002   34.7 
May 2002    42.0 
Oct. 2001   34.5 
May 2001    33.1 
 
Source: INDEC 
 
¶3.  In the Greater Buenos Aires (GBA) area, home to 
one-third of Argentina's population, the average per 
capita income of the top ten percent of families (I+) 
was 31.5 times higher than the average per capita 
income of families in the bottom ten percent (I-). 
 
 
 
This difference has been decreasing since the 2002 
crisis, but it is still well above the average 21-fold 
difference of the 1990s.  (Note: Official figures on 
inequality could be underestimated due to income 
understatements by the surveyed, especially those with 
the highest incomes.  Income understatements should 
not affect comparisons throughout time.  End note). 
 
---------- ---------- ----------- --------- ----- 
GREATER INEQUALITY WITH GREATER PURCHASING POWER? 
---------- ---------- ----------- --------- ----- 
 
¶4.  A growing inequality does not necessarily result 
in a deterioration of economic welfare.  The high 
levels of inequality in 2005 coexisted with the 
highest purchasing power since the early 2002 crisis 
for both the highest and lowest ten percent brackets. 
The economic crisis of 2002 undermined the purchasing 
power of incomes in all sectors and groups.  This 
deterioration was only overcome in 2005 (see Table 
II).  The purchasing power of I+ was 11.1 percent 
higher in the third quarter of 2005 than what it was 
in May 2001, and the purchasing power of I- was 7.5 
percent higher in the third quarter of 2005 than in 
May 2001. 
 
Table II 
Changes in real per capita income for the lowest and 
highest income families 
(Percent) 
 
  Period     Lowest    Highest 
             Incomes   Incomes 
               I-         I+ 
 
III Q 2005        7.5      11.1 
I H 2005          3.0      -8.7 
II H 2004        -2.5      -8.7 
I H 2004         -6.9     -12.8 
IV Q 2003       -18.4     -20.9 
May 2003        -28.9     -27.6 
Oct. 2002       -34.8     -31.6 
May 2002        -40.7     -24.9 
Oct. 2001        -6.3      -2.5 
May 2001                    0.0 
(base)            0.0 
 
Source:  Embassy, based on INDEC statistics 
 
¶5.  National income distribution was surveyed sparsely 
before 2000.  Official surveys have covered GBA on a 
periodic basis since 1974, but were only extended to 
other important urban areas since 2001.  However, 
private studies show that countrywide inequality 
remained low and constant during the 1960s and the 
early 1970s.  Inequality increased in the second half 
of 1970s, remained stable in the first half of the 
1980s, and increased again during the macroeconomic 
crisis of the late 1980s.  After stabilization, 
inequality went down, but did not reach the same pre- 
crisis levels.  The 2002 crisis increased inequality 
once again. 
 
¶6.  A Foundation for Latin American Research (FIEL) 
report showed that inequality worsened throughout the 
1990s.  For example, the ten percent of families with 
the highest incomes in GBA received 43.5 percent of 
all incomes in 1991, whereas they received 48.3 
percent of all incomes in 1998.  Income distribution 
in the rest of the country followed a similar pattern. 
General economic welfare increased during the 1990s 
 
 
despite greater inequality. 
 
¶7.  Inequality in Argentina was eight percent below 
the average for the rest of Latin America in the late 
1990s.  At that time, Argentina was one of the Latin 
American countries with the most uniform income 
distribution, along with Costa Rica and Uruguay. 
However, the recent changes in Argentine income 
distribution differ from the regional pattern. 
Inequality has increased in many countries in South 
America but these changes have been small compared to 
the large changes that took place in Argentina. 
Reputable analysts subsequently argued that Argentina 
no longer belongs to the low-inequality group in Latin 
America. 
 
---------- --------- ------- 
FACTORS AFFECTING INEQUALITY 
---------- --------- ------- 
 
¶8.  The presence of a large middle-class helped to 
explain a more uniform income distribution in 
Argentina, but the middle-class has been decreasing as 
a percentage of the total population, and so has its 
impact.  Equis Foundation demonstrated that middle- 
class families were 78 percent of all households in 
1974, declining to 44 percent in 1985 and 29 percent 
in mid-2004.  Equis Foundation estimated that half of 
the poor in late 2004 had belonged to the middle class 
for at least some time in the past.  The Nueva Mayoria 
consulting firm estimated that the middle class is now 
only 20 percent of total population. 
 
¶9.  Income, as classified herein, takes the form of 
salaries, capital earnings and retirement payments. 
Analyses on the recent evolution of inequality show 
that inequality due to differing salaries is slightly 
influenced by sex, age or geographical location, and 
is strongly influenced by the education level, job 
skills and the economic sector in which the person 
works.  Inequality among the retired increased during 
the 1990s.  Capital earnings inequality in Argentina 
is not well captured by statistics, and there is 
little research on the issue. 
 
--------- ----------- 
REGIONAL DEVELOPMENTS 
--------- ----------- 
 
¶10.  Analysts do not agree on differences in income 
distribution among Argentine regions or provinces due 
to problems related to the compatibility and 
comprehensiveness of the available data.  However, 
they all conclude that income distribution worsened in 
most of Argentina's regions in the last 15 years. 
There is evidence that provincial GDP growth coexisted 
with greater inequality within most provinces.  For 
some provinces, this development goes hand-in-hand 
with international evidence that inequality tends to 
increase with GDP growth for very low levels of per 
capita GDP, while inequality tends to decrease with 
GDP growth for higher levels of per capita GDP. 
Therefore, some researchers state that greater 
inequality in provinces with very low per capita GDP 
is inevitable in the context of growth. 
 
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COMMENT 
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¶11.  Inequality increased during the 1990s, when the 
 
 
average annual growth rate was 5 percent.  Inequality 
increased again in 2005, when growth was estimated to 
be 9.1 percent.  General welfare and real income 
increased both in the 1990s and in 2005 as a result of 
high growth.  That correlation implies that, in 
Argentina at least, rising levels of income inequality 
do not necessarily mean that those on the lower end of 
the income spectrum are worse off. 
 
¶12.  To see more Buenos Aires reporting, visit our 
classified website at: 
http://www.state.sgov.gov/p/wha/buenosaires 
 
GUTIERREZ